Friday, 13 November 2015

In a widely quoted interview with
USA Today, Bernanke said that ‘It would have been my preference to have more
investigations of individual actions because obviously everything that went
wrong or was illegal was done by some individual, not by an abstract firm.’ He makes it clear that he thought some Wall
Street executives should have gone to jail. However, ‘ the Fed is not a law
enforcement agency. The Department of Justice are responsible for that, and a
lot of their efforts have been to indict or threaten to indict financial firms.
Now a financial firm is of course a legal fiction; it’s not a person. You can’t
put a financial firm in jail.’

Going after firms is precisely
what the Department of Justice has been doing in the aftermath of the financial
crisis. It was nothing new. For some decades, prosecutors have preferred
to go after companies rather than individuals, partly because of the alleged
difficulties in prosecuting individuals, but also on the grounds that this was
an attempt to change the ‘corporate culture’ so as to prevent future crimes,
The result has been ‘deferred prosecution agreements’ and even ‘non-prosecution
agreements’ in which companies agree to undertake various reforms to prevent
future wrong doing. Such agreements became the mainstay of white-collar criminal law enforcement. There is little
evidence that such an approach, including the imposition of heavy fines, does
actually change the behaviour of companies.
It did, however, bring in billions of dollars ($220 bn by March 2015)
and kept government housing policy, which required Fannie Mae and Freddie Mac
to buy ever-increasing proportions of subprime loans from the lenders, out of
the picture in any cases brought against the lenders.

In the aftermath of the financial
crisis, the Department of Justice brought many high profile case against
leading banks, but these were settled out of court, as they resulted in the kind of negotiations which were roundly
condemned by Judge Jed Rakoff. He described just going after the company is
‘both technically and morally suspect’, since the prosecutors can only threaten
to prosecute the company if there is sufficient evidence to prove beyond reasonable doubt that fraud has been committed, and, if that can be
established then the managers concerned should be indicted.

Such condemnation from a judge
and from the politicians and media led to a radical change of direction
announced by the deputy Attorney General in her Memorandum on September 9th..
Sally Quillian Yates announced that in the future, the Department of Justice
will turn its attention to individual accountability,
since it is one of the ‘most effective ways to combat corporate misconduct is
by seeking accountability from the
individuals who perpetrated the wrongdoing’. She argued that this ‘deters future illegal
activity; it incentivizes changes in corporate behaviour, it ensures that the proper parties are held
responsible for their actions, and it promotes the public’s confidence in our
justice system’. Ben Bernanke’s remarks are certainly in line with the changing
views about law enforcement.

However, that is not the
fundamental issue concerning the past.
It would, of course, have been possible to bring criminal charges
against senior executives if they could be shown to have been guilty of fraud
as individuals, but the charges were always against the company. The real question is: if senior executives
are to be held accountable, then the
laws and regulations should be clear and of course in force at the time to
ensure that administrative actions or
prosecutions could take place. For
Bernanke to say that some senior executives
should be in prison implies that
he considers that it was possible to do under the regulations or the laws in
existence at the time, but that the regulatory authorities did not refer any
case to the Department of Justice nor take the administrative actions open to
them at the time or in the aftermath of the financial crisis.

Bernanke was in a position to ensure that regulations
were in place so that senior executives could be called to account., but his speeches and the full minutes of
the Federal Open Markets Committee indicate that he did not see the risks in
the growth of the subprime market and weak regulation. Indeed, Bernanke seemed unaware of the extent
of subprime lending and its impact on the economy or even on the banking
sector. Even as late as May 2007, he stated, we do not expect significant
spillovers from the subprime market to the rest of the economy or the financial
system’. In June 2007, he announced a
review of the rules governing lending
practices and supervision. It was too
little, too late. Looking back later,
Bernanke admitted that ‘stronger regulation and supervision aimed at the problems
with underwriting practices and risk management would have been more effective
in containing the housing bubble. The
Big Five investment banks voluntarily agreed to be supervised by the SEC under
a special, undemanding regulatory regime. Inadequate regulatory frameworks and
an unwillingness to take action against individuals meant that senior executives would not, and
often could not be taken to task for their alleged misdeeds.

Thursday, 12 November 2015

I am delighted to be asked to do a blog piece on ‘BT at 20’, and also struck by an echo of
how BT started, around 1982. At the
time I was teaching at LSU College in Southampton. We never had classes on
Friday afternoons, and the Friday lunchtime custom of academic staff was a visit
to a local pub. On one occasion, I had settled down with a pint and a
ploughman’s at The Wellington in Park
Road, when Paul Gardner, our convivial HoD, asked casually, if I might be
interested in devising an undergraduate course in literary theory. Being young
and naïve, I expressed enthusiasm, and Paul said, as if casually, ‘Could you do
it for Monday?’ My weekend ended there, and on the Monday I gave him the
outline syllabus for a theory course. It went through a fast-track validation
route that Paul had set up, and by the following September I was teaching it,
as part of a new degree scheme. It was the first undergraduate course in
literary theory in the UK, and in due course (pun intended), it became Beginning Theory. On Friday last week, more
than thirty years after that lunchtime in The
Wellington (still naïve, but no longer young), I got an email from MUP
inviting me to do a blog piece. I had already agreed to do it before scrolling
down to the punch-line, which read, as I should have anticipated, ‘But we will
need it by Monday’.

Over the weekend, I got out my BT file from way back then, and took a look. There are several
readers’ reports on the BT proposal
from circa 1993, all of them pretty snooty about the possibility (perhaps even
the desirability) of writing about literary theory in a way that students can
understand. The idea for the book had come to me in 1992, when I encountered a
woman just outside Sussex University, on the platform of Falmer Station. She
was reading one of the two (postgraduate) student-directed books about literary
theory which then existed. She was in tears, and I had the distinct thought
that it must be possible to write about theory without provoking that reaction.
It’s a bizarre idea, I know, and (with the obvious exception of Terry Eagleton,
who instigated it) it never really caught on, except with (at most) half a
dozen people worldwide.

When I write, I talk
to myself (which is OK, so long as you say the right things). One of the things
I often tell myself is ‘It’s not extreme enough – make it more extreme’. When I
come back to a piece that I thought I had pushed to an extreme, it usually
feels more normative than it did when I was writing it, but (I hope) it never
just feels standard, run-of-the-mill academic normal. Being extreme in the
context of literary theory means using ordinary language, explaining fully,
finding the example that works, then working it all the way through, and never
pretending to be a full believer in what I only half believe.

Anita Roy, who was the MUP commissioning editor in the early
1990s, sent me the bundle of readers’ reports, saying that I should use anything
in them that seemed helpful. She came to LSU shortly afterwards at my
invitation to do a talk to the Humanities Research Group, which I had set up
with Dr Jane McDermid (now Reader in History at Southampton University). No
official letter had yet been sent, and I had assumed that MUP wasn’t going to
do the book. During the meal afterwards, at a pizza house in Rochester Place,
Anita Roy said something that made me ask in surprise ‘Do you mean you’re
commissioning it?’ and she looked puzzled and said, yes, of course we are. So
that was that - I’ve been with MUP ever since, and have never wanted to be
anywhere else.

The chapters began with the typed out lectures which by that
time I had been delivering on the theory course for several years. The period
of expanding them into a book is vivid in the memory. For over a decade, my
room in college had been spacious and beautiful, with a pair of lofty windows overlooking
the Avenue in Southampton. In the early 1990s – the era known in higher
education as ‘massification’ – student enrolment at colleges and universities greatly
increased. New staff had to be appointed, and my room, with several others, was
sliced into two. Over the summer I wrote in the corridor, listening to the
noise of builders drilling through to make extra doors and flimsy dividing walls.
I had the feeling that I wanted to be somewhere else, and by the time the book
was published in 1995 I had moved to Aberystwyth University.

Anyone who writes a high-selling academic book has to pay a price
– it is the sin for which there is no absolution. But when I lecture, and I see
people nodding with understanding, I feel that I can want nothing better. As a
writer and teacher, the only quality I value is clarity – as Ezra Pound said,
clarity is the writer’s only morality. I have no interest in accolades from
professors, and the ones I like come from students worldwide in emails. The
nicest always tell the same basic story – I was enjoying English, and then in
Year 2 we were hit by the theory course, and I was about to give up the subject
– tears are often mentioned – then someone told me about your book. There was
one email I wanted to have quoted on the front cover – it was from America and
it read in full ‘This book is the real fucking dope – I’m pissed my profs
didn’t tell me about it sooner’. Others come from readers of humbling erudition
– one explained the three transmission errors I had made in a single-line Latin
quotation – we silently corrected them, and I imagined the pain my Latin teacher
would have felt on seeing them. As we have gone through numerous re-prints over
twenty years, errors we corrected a decade earlier sometimes rise from the dead
to haunt us, going unnoticed through two or three reprints before we realise
they are back, and need to be weeded out all over again.

At a deeper level, revising
and updating a book of one’s own seems straight-forward, in theory, but in
practice re-entering the mind-set of a quarter of a century ago is nearly impossible.
I feel about for the way back into a certain line of argument, but am often defeated.
It’s easier to write a new book than to revise an old one, though I am pressing
on anyway towards the goal of the 4th edition. I’m sometimes asked how
it feels to have written a book that everyone seems to know about, and I say
that it feels nice. All I mean is that I like the fact that people know my name
– it’s as elemental as that. Sometimes I have to confess that I’m not the author
of illustrated books with titles like How
to Photograph Your Girlfriend, and I imagine that my namesake may
occasionally have to explain that he is not responsible for the faults of Beginning Theory. I remain extremely
grateful for the twenty-year support and friendship of Commissioning Editor Matthew
Frost at MUP, and likewise that of John McLeod, ex-LSU, and now Prof at Leeds
University, who is co-editor of the Beginnings
series. Being from Liverpool, my
lifelong ambition was to be a paperback writer, and I’m pleased that it has
happened. Also, I remain constantly optimistic that, as it says in the Beatles
song, ‘I'll be writing more in a week or two’.